Assume we bought a machine 5 years ago for $100,000.It was depreciated straight-line to zero over 10 years.It is currently unused.

If we sold the machine "as is", it would sell for $25,000 today.

Our project will last 3 years with revenues of $50,000, $60,000 and $65,000.Expenses are projected to be 40% of revenue.

Taxes are 40% and the required rate-of-return is 10%.At the end of the project, we expect to be able to scrap the machine for $10,000 at the end of the project.

1.What is the initial cost (CF0) for this project?

2.What is annual depreciation

3.What is the beginnin book value of the equipment?

4.What is the ending book value?

5.Make an income statement.

What is the net income for:

Year 1:

Year2:

Year 3:

6.What are operating cash flow?

Year 1:

Year2:

Year 3:

7.What is the after-tax cash flow from selling the equipment at the end of the project?

8.What are the total cash flows?

Year 1:

Year 2:

Year 3:

9.What is payback in whole number?

10.What is NPV (dollars and cents)?

11.What is Profitability Index?(2 decimals)

12.Show how to solve IRR in algebraic format:

0 = -25000 + 22000/(1+IRR) + 25,600/(1+IRR)^2 + 41400/(1+IRR)^3

13.Compute Average Accounting Return (percentage format -- 2 decimals)